Dated: 25 April 2012
Check against delivery.
Good morning, ladies and gentlemen – fellow directors – and welcome to the 2012 Institute of Directors Annual Convention.
It’s a privilege to speak to you today as your Director General in my first Convention speech, and I’m delighted so many of our members have been able to take the time to be here. I’d also like to take this opportunity at the beginning of the conference to thank our sponsors – this event is an important one in the IoD’s calendar and we appreciate their help in making it such a success.
The IoD is proud to be made up of 40,000 people who keep the economy going: creating jobs, serving customers, achieving remarkable things. The hall this morning is a striking illustration of the variety of business in this country, and the variety of business leaders that the IoD represents.
We welcome today many of our Chartered Directors, who have achieved the very top degree of qualification in good governance, board experience and effective business leadership. Last year we awarded the one thousandth Chartered Director accolade - a testament to the success of the scheme.
At the same time, we are joined by business people at the start of their careers. MBA students, drawn from theUK’s leading business schools and, for the first time in IoD history, members of the first cohort of the new IoD Student Membership.
They are here because we need to open our doors to tomorrow’s directors – the leaders and entrepreneurs who will be the heart and the head of the economy in years to come.
Our pilot scheme launched IoD student membership on two campuses, and from September we will extend that to all British Universities. As ever, the IoD will represent the future of business – and, as a result, the future of Britain.
As I’ve spoken – and listened – in IoD branches across the country, some of the most moving stories I’ve heard have been from members who early in their careers gained much from the support and wisdom of more experienced colleagues. The Institute is here for all those who share our belief in enterprise, and I know you will support that tradition.
What the IoD has achieved is a great foundation – but not yet a finished work.
It’s worth considering for a moment what our aims are. We believe in good business. That means three things: well-run companies; successful companies; and, importantly, a positive environment in which companies can flourish.
The free market in which we all work demands, rightly, that we must adapt and innovate in order to survive and grow. That is as true of the IoD as it is of any company. The hard work to deliver that adaptation and innovation has already begun.
Some it has produced results that you can already see – like the young members here today.
Some of it is about to bear fruit, like the Youth Enterprise Loans the Chancellor announced in the Budget – a project which the IoD helped get off the ground. That scheme will mean promising entrepreneurs get the crucial combination of funding and business mentoring to turn their ambitions into reality.
But there is much more that we need to do. British business needs renewal.
There will always be extreme ideological opponents of the free market. They are for the most part on the margins of political thinking, and of policy-making. But we need to take seriously the fact that much of reasonable middleBritainhas also become concerned about how capitalism operates.
The system has had a shock. Andrew Haldane of the Bank of England has calculated that the “net present value” of the cumulative loss in global output from the financial crisis is anything from 60 to 200 trillion dollars.
That is at least twice the size of the European and American economies put together.
The consequences of that loss of output, and the fiscal steps necessary to rein in government spending in an age of austerity, grow more obvious by the day. One doesn’t need to be a protestor on the steps ofSt Paul’s to know that business has real problems. If those who are committed to the free market don’t try to fix those problems, the enemies of private enterprise will do it for us.
Don’t get me wrong. The global financial crisis is not the fault of the businesses represented in this hall today. The companies you run are rightly seen as the backbone of the British economy – and its best hope for recovery.
The average IoD member earns between 80 and 90,000 pounds a year: far from being feather-bedded fat-cats, they are risk-takers working long hours who have often mortgaged their homes to get and keep their businesses going.
The genius of capitalism lies in competition. When competition is abandoned, we should speak up.
If major book publishers are fixing the prices of electronic books, then the American Department of Justice is right to take them to court.
If a historic British business like Cable and Wireless Worldwide is brought to its knees as a result of what the Economist called “poor and greedy management, and an addiction to deal-making that only made investment bankers rich”, we should say so.
If some banks pay three times more in bonuses to top executives than they do in total dividends to shareholders, then I think there are questions to be asked.
In fairness, questions are being asked and there are encouraging signs that shareholders are taking an activist approach to their ownership responsibilities.
Citigroup’s rejection of its chief executive’s pay award and Barclays’ remuneration concessions are two examples. HSBC is even aiming to distribute an equal share of profit to investors, to pay, and to investment.
Capitalism is renewing and reforming itself as it should: through shareholder power, not government intervention.
The IoD must continue to show leadership and independence on the issue of corporate governance – we are no one’s mouthpiece.
There are many stereotypes about business and business people, and the new work I want the IoD to do will also have the beneficial affect of shattering those stereotypes utterly.
From working with young entrepreneurs, to accessing new sectors and applying our knowledge to new ways of doing business, I want anyone who looks at the work the IoD does not only to get a new understanding of us as an organisation – but a new understanding of what it means to be a business leader in modern day Britain. A lot of people, be they politicians, commentators or members of the public, are in for a surprise.
We need to strengthen the IoD by building on our existing work. That is not simply an end in itself, though. We need to do it because it will help us to fulfil our mission to champion good business.
Our work in advising and educating business leaders in good corporate governance and effective leadership is already delivering benefits inBritainand around the world. That must continue, and grow even further.
Our work in explaining the benefits of business not just to those who own companies but to those who work for them, those who make use of them and ultimately to all those who feel the benefits of the wealth and taxes generated by enterprise, will be stepped up.
And our work in campaigning for Government to ensure business has the freedom to flourish as well as the infrastructure to succeed will be more vocal, more pressing and – ultimately – even more effective.
We have had some successes. The IoD played a part in George Osborne’s decision to reduce the 50p rate of tax to 45p, though by no means did he go far enough. Similarly, the accelerated pace of cuts to Corporation Tax was similarly influenced by our work, but still needs to go much further.
Thanks to changes that we pressed for which came into effect a couple of weeks ago, employers now have a bit less to fear in terms of unfair dismissal claims, and are therefore free to employ more people.
But there is still so much more to do.
Whenever I visit an IoD branch or speak at business events around the country, I meet people who feel thatWestminsterandWhitehalldo not understand or appreciate business.
It is our job to set that right. We will be going out there on your behalf to make the case for less onerous regulation, to explain why taxes should be lower; we will be warning of the consequences of poorly thought-out intervention; and we will be urging Government to deliver the vital infrastructure which you need to meet the right people, obtain the right staff and serve your customers. In short, we will be fighting hard to create a Britainwhere all of you can get on with what you do best: getting the job done.
These are tough times, but they are also exciting times. The IoD has a crucial mission to help business leaders navigate today’s difficulties and make the most of its opportunities. With your hard work and your expertise, British business achieves great things every day. With your support, the IoD will enable the potential of British business to be even greater. Thank you.